A stuffed rabbit sewn from velveteen is given as a Christmas present to a small boy. The boy plays with his other new presents and forgets the velveteen rabbit for a time. These presents are modern and mechanical, and they snub the old-fashioned velveteen rabbit. The wisest and oldest toy in the nursery, the Skin Horse, who was owned by the boy's uncle, tells the rabbit about toys magically becoming real due to love from children. The rabbit is awed by this idea; however, his chances of achieving this wish are slight.